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In order to implement structural reform in the government budget of Iran, it is necessary to analyze the budgetary characteristics. This paper attempts to identify the determinants of budget deficit by using ARDL modeling based on the Iranian budget records for the period 1964-2020. Theoretical and empirical evidence both show that three main factors including budgeting structure, macroeconomic situation, and political economic forces could play a definite role in the budget deficit. Long term estimated coefficients of the research models explain that budget deficit will be worsened with bigger size of government, and with the increase in the government expenditure dispersion in comparison with the government revenues dispersion, also with a bigger share of public investment in total investment, and finally with wider GDP gap and inflation gap. Correspondingly, more inequality of income leads to a bigger deficit. The results also indicate that in the economy of Iran expenditures are a driving force that brings about the budget deficit. It is evident that in a resource-based economy, an increase in revenues of resource exports would relocate the economy to the positive output gap and boom cycle that in turn will push governments to a higher level of expenditures and a budget deficit. During the recession period in which government revenues decline, the recurrent expenditures resist adjustment due to its sticky behavior, hence the deficit gets worse. Meanwhile, political economic factors such as weakness of the government power and pressure by interest groups, all together have magnifying effects on worsening the budget deficit. During the era that foreign reserves in Stabilization Account and National Development Fund were enough to compensate deficits, the presence of the wealth effect on government expenditures, and thus on the budget deficit, is confirmed.

Since the financial crisis of 2007-2008, macro-prudential policies have been widely used to achieve financial stability. Moreover, for most oil-exporting economies, oil revenues are an essential source of fluctuations in macroeconomic variables, which necessitate the adoption of macroeconomic stabilization policies. By constructing a macro-financial DSGE model, this paper examines the role of macro-prudential policies in financial stability and how they interact with macroeconomic policies in an oil-exporting economy.Applying quarterly data of the economy of Iran during 1990-2017, the results show that macroeconomic stabilization policies are not considered as sufficient condition for financial stability. The implementation of macro-prudential instruments is necessary to reduce financial instability. Moreover, the results indicate that the cooperation of the macro-prudential and monetary authorities increases the effectiveness of the macro-prudential and monetary policies.